Full Judgment
2. The appellants imported what they claimed to be a consignment of High Voltage Partial Discharge System comprising of: 4. Detective System comprising of detector to provide calibration signal oscilloscope readout of partial discharge, low voltage calibration signal coupler, coaxial signal cable assemblies and interconnecting cables, recognition and recording sub-systems, evaluation and recognition unit, X-Y Recorder, Master Calibrator, Partial discharge site locating system etc.
7. Water (Cable) termination system with high capacity, continuous duty water conditioner.
2.1. They claimed assessment under CTH 90.30.39 with benefit of Notification No. 69/86. It was their contention that all these items even though invoiced separately contribute to the principal function of detection of partial discharge in high voltage cables, and therefore, merit assessment as instruments as such under CTH 90.30.39. Asstt.
Collector relying on catalogue held that partial discharge system basically consists of only 3 major components, namely, partial discharge detector, power separation filter and calibration signal coupler. He, therefore held that only these 3 components together would constitute a partial discharge system and other items would have to be assessed on merits.
3. Arguing for the appellants, the Ld. Advocate submits that each of these items contributes to a clearly defined function which is of detecting partial discharge of electricity in cables which are intended for carrying electricity at a very high voltage. The parts together complement each other and contribute to the principal function which cannot be performed in absence of any of the parts which have been imported. In this view of the matter, therefore, all the parts which in some way contribute to the principal function have to be assessed together as the system.
4. Arguing for the Revenue, the Ld. DR submits that some of the parts have been invoiced separately which itself indicates that these are not basic to the system but could at best be only auxiliary, and therefore, Asstt. Collector was correct in relying on the catalogue itself to hold that only 3 components in regard to which he has allowed benefit would constitute the system and the remaining items would have to be assessed on merits. On the specific question from the Bench, however, the Ld. DR fairly concedes that Asstt. Collector and Collector (Appeals) while rejecting the claim in regard to items other than 3 mentioned earlier ought to have arrived at a finding in regard to appropriate classification in the respect in tariff headings of the items in respect of which benefit has not been allowed.
5. We have heard both sides. It has been pleaded before us that partial discharges bubbles or voids remain unnoticed in the normal high voltage test and could be harmful to the life of insulant. It is, therefore, necessary to carry out sophisticated tests to determine the magnitude of discharge and for this, a system is designed with necessary parts to work in such a way as would effectively determine the magnitude of such discharge which otherwise through normal tests would remain undetected.
The system may apparently be consisting of separate parts but all parts are inter-connected to contribute to the principal function of detection of discharges. We notice that Asstt. Collector has based his findings on the catalogue presented before him which indicate that partial discharge detection system consists of 3 major components: (i) Partial Discharge Detector, (ii) Power Separation Filter, and (iii) Calibration Signal coupler.
6. According to Chapter Note 2 of Chapter 90 parts and accessories which are goods included in any of the headings of this Chapter or of Chapters 84,85 or 90 are in all cases to be classified in their respective headings. Note (b) of Chapter Note 2, however, indicates that other parts and accessories if suitable for use solely or principally with a particular kind of machine, instrument or apparatus or with a number of machines, instruments or apparatus of the same heading are to be classified with the machines, instruments or apparatus of that heading. We also note that Chapter Note 3 of Chapter 90 extends provisions of Note 4 of Section XVI to the goods of this Chapter. Section Note 4 requires that where a machine including combination of machines consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. This, however, has to be read with Section Note 2(a) which indicates as in case of Chapter Note 2(a) of Chapter 90 that parts which are goods included in any of the headings of Chapter 84 or 85 are in all cases to be classified in their respective headings.
7. We find that while holding only 3 parts as constituting the partial discharge system and ordering the assessment of remaining parts on merits, the Asstt. Collector has not arrived at finding in regard to appropriate classification of the parts which he has refused to consider as part of the whole system. Collector (Appeals) has also not gone into this question. We are of the view that a finding could not be arrived at unless the parts which have been held to be not part of the system and not contributing to the principal function are shown how they are assessable on merits under their appropriate headings. Asstt.
Collector ought to have determined the appropriate classification on merits of the other items which he held as not constituting the part of the system and meriting classification in the first place under their appropriate heading. It is only after doing such exercise that a view could be taken whether indeed the parts are goods in their own right to merit classification under their appropriate heading or they are inbuilt into the system in such a way that they become part of the system by contributing in some way or the other to the principal function of the system.
8. We are, therefore, of the view that matter would have to go back by way of remand. We, therefore, set aside the impugned order and remand the matter to the Asstt. Collector for arriving at a finding with regard to appropriate heading of each item and thereafter consider whether all the items constitute a system or there are certain items which would first take their classification in their respective heading. The appellants shall be at liberty to produce evidence before Asstt. Commissioner to substantiate their claim as to how each part is basic to the system and contributes to the principal function that the system is intended to perform. The appellants shall be given an opportunity of hearing before the case is decided.